Create a non-profit organization

If you're starting a new business with the intent of helping people in your community, you might want to consider starting a non-profit organization. In many ways, non-profits are similar to for-profit businesses.

You'll still need careful planning and clear objectives if you hope to succeed. Remember: the people you hope to help with your new venture may be depending on your success.

We understand how important it is to help out in the community, so let us help you understand the unique position of the non-profit in today's business world.

Registering a non-profit Expand/Collapse

Registration with Revenue Canada

In the case of a non-profit organization, 'registration' refers specifically to registration with Revenue Canada for income tax exemption. If your organization has no need for tax-exempt status-if it will not be accepting gifts and issuing official receipts for income tax purposes-then your organization does not need to register.

Qualifying for registration

If your organization does need to register with Revenue Canada, first you'll need to demonstrate that your organization truly qualifies as a non-profit. There are two principle factors that disqualify your organization for registration.
The income of the organization may not personally benefit any proprietor, member, shareholder, trustee or settlor of the organization. This does not prevent the organization from paying for services rendered.
Your organization may not espouse, promote, support or seek to achieve any political agenda, party, purpose or doctrine, nor may your organization seek to persuade the public to adopt a particular social view or attempt to bring about or oppose changes in the law or government policy.

Advantages of registration

There are two basic advantages to being a registered non-profit organization. First, the organization will be able to issue receipts for gifts received. These receipts reduce the tax payable for the individual donor, or, in the case of a corporation, reduce the taxable income. The second benefit is that, upon registration, the organization is exempt from paying income tax.

Obligations of a registered charity

Of course, along with the benefits, there are requirements that a non-profit organization must meet in order to maintain its registration. First, the organization must donate its resources to charity. Second, it must continue to meet the requirements that qualified it in the first place. Third, a Registered Charity Information Return must be filed within six months of each year-end.

Selecting the Board of Directors Expand/Collapse

Finding direction

A non-profit organization may have a few volunteers or it may have hundreds. Without a strong board of directors to steer the organization, their efforts will not be fully realized, and the aims of the organization may not be effectively met. To allow your directors to run the organization effectively, they'll need to know what is expected of them. Without some sort of job description, directors will not be able to focus their efforts-and the efforts of others-toward specific goals.

Directors' roles

In determining what you need from directors, it's a good idea to make a list of required skills and a list of current board members. By cross-referencing the lists, you can not only assign specific duties to existing board members, but also determine what holes need to be filled.

Another good idea is to consider having both an accountant and attorney on the board of directors. These sorts of professionals have specific knowledge that can be critical to your organization. Keep in mind, however, that while the advice and insight gained may be extremely helpful, conflicts of interest may prevent them from representing your organization in an official capacity.

Types of charities

The Income Tax Act currently recognizes three types of charity: the charitable organization, the public foundation and the private foundation. The specific type of organization may also restrict who may or may not be a director depending on how the individuals are related through blood, adoption, marriage, common-law or close business ties.

In a private foundation, 50% or more of the directors may be related persons. In a public foundation or charitable organization, less than 50% of the directors may be related persons.

While it may seem like a good idea to have your friends and family sit on your board of directors, it may not be an option, and in any case, may not be the best thing for those you wish to help. Remember that your organization exists to help your community and the rules governing the structure of the board are in place to ensure that all registered non-profit organizations are working to that end.

Developing a vision Expand/Collapse

A non-profit business plan

Your non-profit organization will need a well developed business plan to get it off the ground. In order to simply apply for registration you'll need to clearly state the objects of your organization. You must also be aware of and prepared to comply with all federal, provincial and municipal requirements. Furthermore, in order to be successful, you'll need to have a carefully developed structure, operating procedures and bylaws.

It may sound like a lot of work, but a business plan for a non-profit organization isn't that different from any other business plan. You simply need to describe why your organization is valuable, both to those who benefit from it, and to those who fund it. 

Scope

It's important when envisioning the scope of your non-profit organization to have specific aims and goals in mind. If your mandate is "to help the poor", you're probably thinking too big. You need to carefully define the group who will benefit from your activities and how they'll benefit specifically. A better mandate may be "to feed the homeless and hungry within the municipality by establishing a soup kitchen and providing information and access to local missions and shelters".

Vision and strategic planning

Although you should always keep long-term goals in mind, you may find them taking a back seat to the struggles of day-to-day operation. If you persevere through the difficult early years, your organization will grow and things will calm down considerably.

Just because things stabilize doesn't mean you can relax. The danger now is not in failing outright, but in stagnating and losing touch with your community. Take the time to look carefully at what worked in the past and what failed. Use this information to develop a new, stronger plan that will help you help others even more in the future.

Developing a constitution and bylaws Expand/Collapse

The rules of your organization

Aside from having to obey the legal and financial regulations of your province and region, a non-profit organization needs its own internal constitution and bylaws. These rules, which must be decided on and approved by the board of directors, will govern all the operations of your organization.

The scope of a constitution

Aside from stating the purpose of your non-profit organization, a constitution also defines its structure. It establishes, among other things, the number of directors, the length of directorial terms and the powers and duties of the board. A constitution details all of the procedures for the organization, from how minutes are entered and distributed, to how votes are conducted. Further, a constitution needs to outline the procedure for making changes and amendments to the constitution itself.

A constitution can be fairly simple, or incredibly complex. In general, the larger your organization is, and the larger the geographical area it services, the more complicated your constitution will need to be. For a non-profit organization that you operate largely from home to the benefit of people in your immediate neighbourhood, your constitution may be only a single page in length. For a national organization, with directors serving regionally and flying across the country for annual meetings, you'll need a fairly lengthy constitution.

If your organization is incorporated, you'll not only have a board of directors for the organization, but officers for the corporation as well. The Articles of Incorporation will detail the roles of the directors, but the constitution must be drafted in full awareness of the relationship that exists between board members and officers.

Writing a constitution and bylaws

Even a simple constitution is an important legal document. With that in mind, it's probably a good idea to draft your constitution with the assistance of an attorney experienced in non-profit law. Furthermore, since it is not always easy to amend a constitution once it's approved, make sure that it not only serves the organization in the early stages, but that it will also be adequate when your organization expands.

Insurance considerations Expand/Collapse

Are you covered?

Non-profit organizations have a lot of the same insurance needs as regular businesses. If you lease office space, for example, you'll need to consider renters insurance that covers theft and fire to protect any office equipment or furniture that the organization owns.

If you're using a vehicle for operations, make sure you have insurance that complies with the regulations of your province, especially if there will be multiple drivers.

Bond insurance should be considered if you have board members or volunteers working with money.

If your project involves working directly with the public, you may need liability protection in the event that something unexpected or unfortunate happens.

Special considerations

As a non-profit, there are a few other types of insurance that may be required.

If your organization uses volunteers, you should think about having them covered as part of your original liability agreement. This protects volunteers if they're negligent while performing duties and a client gets injured somehow.

If there are social workers involved in your operation, you'll need to get what is called Social Workers Professional Liability, which covers any unskilled or negligent act resulting in harm to a client.

It's essential for any kind of facility that has a clinic or other medical operation to get Medical Malpractice insurance to protect against a client's lawsuit in the event of any unfortunate incident.

Creating the organizational structure Expand/Collapse

Non-profit structure

Non-profit organizations come in all shapes and sizes. A poetry group that gives free readings at a café once a month is just as much a non-profit organization as an international agency mandated to protect a certain species of wildlife.
There are, however, two main types of non-profit organization: those that are incorporated and registered as non-profit charitable organizations, and those that are not. If you are incorporated, your organization will probably function very much like any other corporation, and that means you need a formal structure.

Starting structure

The structure that your organization has at the beginning will be determined by your Articles of Incorporation and your constitution. There will be corporate officers, a board of directors and a staff that reports to the board, or to an executive director appointed by the board.

Aside from the officers, the board and the staff, non-profits have one thing that most for-profit corporations do not: volunteers. In many ways, volunteers function as an extended staff. They are often assigned to the programs offered by your organization where they can most directly serve the people you're trying to help.

Organizational theory

There are thousands of books and papers written on the topic of organizational theory and there is no one way to set up your organization.

One of the key roles of the board of directors is to constantly analyze what is working and what is not. If you adopt an organizational structure that is not helping you meet your goals, you'll need to change it.

A good director will never be afraid to reassess the organizational structure and initiate changes. Some directors may even feel that changes need to be made periodically to structures that are working, just to keep things from growing stagnant. The point is, the ability to adapt and to continually strive for excellence can only be a benefit, both to the organization and to those it serves.

Marketing for non-profits Expand/Collapse

Getting to know you

As a non-profit organization you have to market yourself to two different groups: the people who stand to benefit from the services that you're providing and the people who want to support those services. If you're sponsoring a hot meals program, you first need to let the people who need this service know how to contact you to obtain help. You also need to get the word out to the people in the community who would like to support your cause, either by volunteering their time or by donating money, building space, materials, etc.

Advertising

Word-of-mouth is the cheapest and easiest way to get information out to your target audience. Information will be spread quickly throughout the community to the people who can use it once people start talking about your organization. Putting up posters in designated areas with information about your organization or a specific event you're holding can work in much the same way.

Local advertising in the print media that circulates in the area where you're focusing your efforts can also be effective and fairly inexpensive. In some cases, a publication may provide this service to you organization free of charge. This is a good way to get across information to either the people you want to help, or to the people you would like help from. Make sure that you're prepared to advertise well in advance of any event you want publicized as it may be that an ad won't appear for some time after you've submitted it. 

The internet

You can also use the internet to advertise your organization. There are hundreds of websites already set up to help get non-profit project information out to the public. It may be that the people who will most benefit from your efforts do not have easy access to computers. Even so, there may be another organization that can pass your information on to those who might be interested.
If you have the means to create your own website, you can publish all of your goals, what programs you currently have and any events you'll be holding in the future. You can also use your site to set up a system through which interested parties can easily contact you and even make a financial contribution to help your cause.

Staffing and payroll Expand/Collapse

Staff vs volunteers

Many people are unable to help out a non-profit organization by donating money, but are willing to donate something just as important: their time. Finding people who will work for you for free isn't easy, but it's not impossible either. There are several internet sites devoted to matching volunteers with organizations.

Aside from volunteers, you will likely require at least a few paid staff. As with any business, hiring staff requires you to carefully decide which jobs you need done, interview prospective employees, and finally hire the best candidates. Be sure to comply with the Employment Standards Act and all other regulations governing employer/employee relations.

Paying employees

In the case of paid employees, you'll require a payroll plan to keep track of employee hours, wages and salaries. You'll also need to make deductions from their paycheques for income tax, employment insurance and federal pension plans. You also have to pay Worker's Compensation costs to protect your employees in the event that they are injured while on the job. Because of the many issues involved when you hire employees, it's probably a good idea that you

Gaining support for the organization Expand/Collapse

How do you receive money?

As a non-profit organization, the majority of your funding, comes from small, individual contributions. These are people that you have reached who believe in what you're trying to do and want to support your cause. It's essential that you make it easy for them to contribute financially. If the process of donating is too arduous, they're less likely to help.

Have an account

It's important to open a bank account for your non-profit organization that is separate from your personal account. This will allow you to more easily budget the amount of money that comes in and goes out. Another benefit to having a separate account is that you can cash cheques made out to your organization, lending a sense of legitimacy.

You can also establish a merchant credit card account. Just contact the financial institution that services your business and tell them that you want to be able to receive credit card contributions. Once you have this option in place, it will make it very easy for people to contribute financially. 

Making contact

If you are approaching members of the community through a face-to-face campaign, they can simply make cash donations, or pay with personal cheques. It's easy for you and for them, and there are no service charges involved. If you're using a mail-out campaign, people will be able to pay with cheque or credit card.

You can also use the internet to collect donations. There are many websites in existence designed to help people make charitable donations to non-profit organizations online. If you register with one of these companies, you can reach countless people that potentially want to help your project. If you create your own web page, people will have myriad options if they decide they want to contribute.

There are also websites that allow users to make monthly contributions, which are directly deducted from their paycheques.

Look into all of your options. The easier you make it for people, the more likely they are to make a contribution to your cause.

Grants for non-profits

There are two major types of grants available to a non-profit organization. They are government grants and foundation grants, but the amount of money they contribute isn't as significant as people think. Foundation grants, for example, contribute less than 10% of all non-profit revenue. Grants can be a big help in starting, and continuing, a non-profit organization, but you can't rely on them as a major means of support.

Budgeting

If you're applying for continuing grants, organizational budgets are a necessity. The people giving you the grants need to see that you're using the money to achieve what you set out to do.

Accepting credit card donations

You need the support of your community to start up a new non-profit organization and to keep that operation going. Whether you're a small local project or a huge, national non-profit, the support of people who want to help you is essential. Make it easy for your supporters to help you financially by getting a merchant credit card account.

How to register

Talk to the financial institution that handles all of your non-profit organizations' funds and ask them about setting up a merchant credit card account. If they can't help you themselves, they will be able to guide you to an institution that can.

The benefits

Once you have registered, you'll be able to receive charitable donations via credit card. This makes it easier for people who believe in what you're doing to contribute financially.

This is especially beneficial if you're operating on the internet. You can receive credit card donations on your own website, or use one of the many sites already in existence designed to make the transaction between non-profits and the public as simple as possible. Web providers can guarantee you secure credit card transactions so your potential contributors won't have to worry about their donations falling into the wrong hands.

Getting a merchant credit card account will make it easier for potential contributors to back you financially. It can really help your non-profit organization get the funding that it needs to achieve its goals.

G&F Financial Group Insurance Services Ltd. is a wholly-owned subsidiary of G&F Financial Group. This website is for informational purposes only and is not intended to provide specific insurance, financial, investment, tax, or other advice to you, and should not be acted or relied upon in that regard. We encourage you to seek personalized advice from a qualified professional. Insurance products are underwritten by certain licensed insurance companies and are only available throughout British Columbia, Canada